Measure profit and loss for a period
Explain what profit or loss measures and why the accounting period matters.
Cambridge IGCSE Accounting 0452 / (9–1) 0985, 2027–2029 Version 1. These lessons follow the 2027–2029 syllabus only; the separate 2026 syllabus update is not yet mapped. Written practice is self-checked, not an official Cambridge grade. Full timed-paper practice and human subject-teacher review remain pending.
Before you begin
- No previous accounting study is assumed. Keep the business, transaction and accounting period in view, and distinguish a resource, a claim and a performance result.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What does profit compare?
What you will learn
- Distinguish income, expenses, profit and loss
- Explain why a business measures profit or loss
- Keep profit separate from cash
Profit compares income and expenses
For a period, profit is income earned less expenses incurred. If expenses exceed income, the result is a loss. State the period because a result such as ‘$4,000 profit’ is incomplete without knowing when it was earned.
Profit provides evidence about financial performance. Owners can compare periods, and managers can investigate whether sales, costs or both contributed to a change.
Profit is not the cash balance
A sale on credit can contribute to income before the customer pays. A cash receipt can also relate to a loan or owner investment rather than income. Profit measures performance using income and expenses; a cash balance measures money held at a point in time.
A profit figure is useful but does not alone show cash available, the cause of a change or whether a decision was successful against every objective.
Pause and explain
A business reports a profit but customers have not yet paid several invoices. What can be concluded?
Worked example
A repair shop earns $9,200 income and incurs $7,650 expenses in April. Calculate the result and state what it measures.
Show the worked solution
- Write income for the period.
- Subtract expenses: 9,200 − 7,650 = 1,550.
- Name the result and period.
Answer The shop made a profit of $1,550 in April. It measures income less expenses for that accounting period, not the shop's cash balance.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
A tailor earns $5,800 income and incurs $4,950 expenses in June. Calculate profit or loss.
Give me a hint
Subtract the period's expenses from its income.
Compare my reasoning
- Income = $5,800.
- Expenses = $4,950.
- 5,800 − 4,950 = 850.
Profit for June = $850.
Look for these in your work
- Correct subtraction
- Correct result label
- Period stated
A shop's income rises from $12,000 to $13,500, while expenses rise from $10,400 to $12,900. Compare profit in both periods.
Give me a hint
Calculate each period separately before comparing.
Compare my reasoning
- Earlier profit: 12,000 − 10,400 = $1,600.
- Later profit: 13,500 − 12,900 = $600.
- Profit fell by $1,000 even though income rose.
Profit fell from $1,600 to $600, a decrease of $1,000. Higher income did not prevent a fall in profit because expenses increased by more.
Look for these in your work
- Both profits correct
- Change calculated
- Income and expense movements linked
A business receives a $2,000 bank loan and records $1,300 profit for the year. Explain why the two amounts are not added to calculate profit.
Give me a hint
Classify the loan separately from income earned through activity.
Compare my reasoning
- The loan creates a liability to repay the lender.
- It is financing, not income earned from the business's activities.
- Profit remains based on income and expenses for the year.
The loan is financing that creates a liability, not earned income. It therefore does not increase profit; the $1,300 is the stated period profit.
Look for these in your work
- Loan classified as financing
- Liability recognised
- Profit measure protected
Common mistakes
- Using receipts instead of income earned
- Calling profit the amount of cash in the bank
- Reporting a result without its period
What can you explain now?
Income is $6,400 and expenses are $6,900. What is the result?
Compare with the explanation
A loss of $500
Expenses exceed income by 500.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
In one sentence, explain how profit differs from cash held.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.